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A Foolish Take: How Loyal Are Amazon Prime Members?

One of Amazon's (NASDAQ: AMZN) major long-term initiatives is to grow the membership of its Prime program, which gives subscribers a variety of perks, from free shipping to streaming videos and music, in exchange for an annual fee.

The company has always been tight-lipped about the number of Amazon Prime members it has. Current estimates put the figure at somewhere north of 65 million, with one estimate at putting it at 90 million.

Regardless of the precise number, one of Amazon's challenges now is not just to attract new Prime members, but also to make sure its existing ones stick around from one year to the next. Its success at that is measured by its membership renewal rate.

Data source: Chart by author.

No surprise, the company doesn't share the renewal rate of Amazon Prime members either. However, a recent survey of 1,000 Amazon Prime members found that 74% of them planned to renew next year. That may seem high, as it is a comfortable majority, but it pales next to the low churn of a company like Costco (NASDAQ: COST), which claims a membership renewal rate of 90%.

Truth be told, Amazon's renewal rate is probably higher than the survey suggests. That's because Prime members are enrolled in autopay by default. As a result, it's not unreasonable to think that a healthy share of members who might have left if forced to think about it actively will renew simply out of inertia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Maxfield has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.